Bolivianization, an arsonist in a gunpowder factory
By: Hugo Marcelo Balderrama - 10/08/2026
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Juan Antonio Morales, who was president of the Central Bank of Bolivia between 1995 and 2006, was the architect of Bolivianization. The measure, which aimed to encourage the use of the Bolivian peso and, at the same time, discourage the use of the dollar, was implemented in several stages:
- Creation of the ITF in 2004.
- Much higher legal reserve requirements for dollar deposits.
- Widened exchange rate spread.
- Mini-revaluations and other measures to promote the use of the Bolivian currency and discourage the use of the dollar.
In several of his writings, Morales admitted that the objective was to fully regain control of monetary policy, which was largely hampered by the high levels of dollarization in the national economy. In other words, the currency was completely nationalized; consequently, the State was able to artificially lower the cost of credit, displace the dollar (the good currency), and force the population to use the Bolivian peso (the bad currency), thus expanding the economy through credit expansion.
The Bolivianization of the currency, in a historically unstable country like Bolivia and with the MAS party on the verge of seizing power, was like putting an arsonist in charge of a gunpowder factory. That's why the Bolivian peso has been reduced to a zombie currency devoid of any confidence, a fact reflected in the exchange rate, which has been steadily rising for the past two years.
But beyond the Bolivianization process, we must examine the squandering of resources financed by the MAS party using the Central Bank of Bolivia's international reserves. For example, in 2011, Marcelo Zabalaga, then president of the BCB, announced that the international reserves would be used to grant $1.5 billion in loans to YPFB, ENDE, and COMIBOL. Under Pablo Ramos's administration between 2017 and 2019, the situation was exactly the same; the idea that the BCB should, and should not, finance the state's "strategic investments" became normalized. Essentially, it was a step backward to the delusions of state-owned enterprises, a practice very much in vogue during the 1970s and 80s.
At this point, a valid question arises: is there a solution?
Yes; in fact, a very quick, efficient, and morally correct one: dollarization.
This measure allows us three things that are by no means negligible:
Remove the BCB's ability to issue banknotes and expand artificially cheap credit in local currency.
To give the system a confidence boost that will attract investment.
Prevent the government from using currency devaluation to favor the export sector at the expense of the rest of the population.
Those who claim that dollarization is impossible due to the limited amount of dollars are mistaken: the value of money depends on its purchasing power, not its absolute quantity. Logically, any amount of dollars in the country is sufficient for dollarization.
Furthermore, Bolivians over the age of 35, to some extent, grew up in a bimonetary economy; that would make the transition to using foreign currency much easier.
While it is certainly true that the country requires a large number of reforms, dollarization guarantees, at least, and this is no small matter, that politicians of any stripe will not use the local currency to finance their megalomaniacal and authoritarian projects.
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